Canada-EU trade talks with Wallonia collapse as Freeland heads home

Last-ditch efforts to salvage Canada's trade deal with the European Union appear to have collapsed Friday, as International Trade Minister Chrystia Freeland walked out of talks with the regional government of Wallonia.

The region has been blocking the deal that was supposed to be signed next week.

"Canada worked really hard, and me personally, I worked very hard," she said in French, expressing Canada's disappointment — as well as her own — at this turn of events.

"It's become evident for me, for Canada, that the European Union isn't capable now to have an international treaty even with a country that has very European values like Canada. And even with a country so nice, with a lot of patience like Canada."

"I've worked very, very hard, but I think it's impossible," the minister said, reflecting on the months of travel and lobbying across Europe she's invested personally in trying to garner enough support, working in tandem with her EU trade counterpart, Cecilia Malmstrom.

"We have decided to return home. I am very sad. It is emotional for me," she told reporters. "The only good thing I can say is that tomorrow morning I will be at home with my three kids."

Freeland characterized the failure to come to a consensus and proceed with signing the Comprehensive Economic and Trade Agreement at the planned Canada-EU Summit next Thursday as a "missed opportunity."

Earlier, Paul Magnette, the president of the Belgian region of Wallonia, briefed his regional parliament, saying that although talks were productive, difficulties remain and he's not prepared to reverse the decision to reject CETA.

"We made new significant progress, especially on the agriculture issues, but difficulties remain, specifically on the symbolic issue of arbitration, which is politically extremely important," he said in French.

Magnette shared with his MPs modifications proposed by European Union officials after lengthy discussions stretched late into the evening Thursday.

The European Commission, not Wallonia directly, is in charge of negotiating the deal with Canada on Belgium's behalf. But because Belgium's constitution gives regional governments a role in trade agreements, this local legislature representing a few million people has ended up with an effective veto over a trade deal that impacts the entire continental trading bloc of over 500 million.

"After consideration, [the modifications] are not enough. We need to go deeper on other issues such as the public services, and some definitions need to be more accurate, but the discussion we had with the Canadians was very constructive," he said.

Trudeau call last night

Magnette's rejection of the EU's most recent offer adds more drama to a week of deadline extensions and existential debate, as Europe fights for the consensus it needs both inside Belgium and across its 28 member states in order to proceed with a deal it desperately needs to make.

An EU source in Ottawa said Friday that it does not consider this the end of the process.

On Thursday, the president of the European Union, Donald Tusk, offered the blunt assessment that if this hard-fought deal with a progressive partner like Canada couldn't move ahead, the EU's credibility as a negotiator of any free trade deal in the future was in doubt.

"We have tried to work over the last few hours and during the night," Belgian Prime Minister Charles Michel said as he arrived at the European Council talks in Brussels Friday morning. "I spoke on the phone with Justin Trudeau to see what avenues we could be pursuing to come out of this difficult situation on top."

"I want to continue these dynamic discussions," Michel said at a news conference later in the day. "I want to give them all the chance to succeed and overcome these difficulties."

"If the EU doesn't succeed in finalizing this economic treaty with Canada, this could mean that the [Brexit] discussions with the U.K. will also be very complex," he said.

Chancellor Angela Merkel, speaking from the perspective of Germany — home to large protests and intense internal political debates before confirming it would sign — said she hoped "for the remaining inconsistencies to be cleared up here in Belgium," but would not comment in further detail on the EU's next steps.

Freeland said earlier this week that the ball was in Europe's court to sort out its internal difficulties.

But over the last 24 hours, her plans to travel to World Trade Organization talks in Oslo, Norway were postponed so she could play a role in negotiations with the Walloons, at the request of European Commission President Jean-Claude Juncker.

"I am very grateful that she travelled to Brussels," he said Thursday evening. "I think that the level of contact and the intensity of the contacts we had with the Canadians will be seen, one day, as having been useful."

Signature 'should be easy part'

It's not immediately clear exactly what compromises or modifications Canada offered or agreed to in the last day of frantic negotiations.

Additional reservations to signing the agreement from Romania and Bulgaria have also not been lifted, pending resolution of a long-standing visa dispute.

European Commission President Jean-Claude Juncker, left, and European Council President Donald Tusk warn that if the European Union cannot sign its trade agreement with Canada, the credibility of its entire trade policy may be in jeopardy. (Geert Vanden Wijngaert/Associated Press)

In Ottawa, the opposition Conservatives — who were in government when CETA was negotiated — kicked off question period by suggesting they could have done things better.

"It was the Conservatives who got the hard part done," said Conservative House Leader Candice Bergen. "Now the Liberal government is struggling with what should be the easy part: putting a final signature on the deal we delivered."

"This deal was dead when we took over office and it's only because of the progressive elements that we added to the agreement... that we have come this far," replied Freeland's parliamentary secretary David Lametti. "Even though we've been flexible, there is no agreement yet on the table."

Outside the House of Commons, NDP House Leader Murray Rankin said this setback could be an opportunity to improve the deal, including its provisions on pharmaceutical drug patents.

Maude Barlow's Council of Canadians worked with civil society groups across Europe to build opposition to the agreement.

"There is no way to meet the demands of the millions in Europe opposed to CETA without opening the deal itself," she wrote CBC News from Germany.‎

"Wallonia's courageous stand will send our governments back to the drawing board, hopefully to think about a very different kind of trade agreement based on the values of sustainability and justice."

Status quo without deal

If CETA came through, roughly 98 per cent of the tariffs on goods traded between Canada and the European Union could be dropped provisionally as early as next year, potentially lowering prices on a wide range of products.

The agreement as negotiated goes far beyond tariffs, however, eventually opening things like government procurement, which may provide opportunities for Canadian bidders in European jurisdictions.

But Canada has also agreed to allow more European imports of everything from cheese to cars. If CETA fails, Canadian businesses concerned about their losing market share may sigh with relief.

Controversial foreign investor arbitration measures, already reworked once earlier this year, appear on hold pending not only this week's talks, but also a court decision next spring that will interpret important EU jurisdictional issues.

While the bulk of the deal could be provisionally applied following a ratification vote in the European Parliament next year, full implementation must wait for votes in over 30 national and sub-national legislatures across Europe.